--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
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JUNE 30, 2003
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THE VALUE LINE
FUND, INC.
[LOGO] VALUE LINE
NO-LOAD
MUTUAL
FUNDS
INVESTMENT ADVISER Value Line, Inc.
220 East 42nd Street
New York, NY 10017-5891
DISTRIBUTOR Value Line Securities, Inc.
220 East 42nd Street
New York, NY 10017-5891
CUSTODIAN BANK State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
SHAREHOLDER State Street Bank and Trust Co.
SERVICING AGENT c/o NFDS
P.O. Box 219729
Kansas City, MO 64121-9729
INDEPENDENT PricewaterhouseCoopers LLP
ACCOUNTANTS 1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL Peter D. Lowenstein, Esq.
Two Sound View Drive, Suite 100
Greenwich, CT 06830
DIRECTORS Jean Bernhard Buttner
John W. Chandler
Frances T. Newton
Francis C. Oakley
David H. Porter
Paul Craig Roberts
Marion N. Ruth
Nancy-Beth Sheerr
OFFICERS Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
Nancy L. Bendig
VICE PRESIDENT
Brett Mitstifer
VICE PRESIDENT
Stephen E. Grant
VICE PRESIDENT
David T. Henigson
VICE PRESIDENT AND
SECRETARY/TREASURER
Joseph Van Dyke
ASSISTANT SECRETARY/TREASURER
Stephen La Rosa
ASSISTANT SECRETARY/TREASURER
THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE RECORDS OF
THE FUND WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND, ACCORDINGLY,
THEY DO NOT EXPRESS AN OPINION THEREON.
THIS UNAUDITED REPORT IS ISSUED FOR INFORMATION OF SHAREHOLDERS. IT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY A CURRENTLY EFFECTIVE PROSPECTUS OF THE FUND (OBTAINABLE FROM
THE DISTRIBUTOR).
#526701
THE VALUE LINE FUND, INC.
TO OUR VALUE LINE
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TO OUR SHAREHOLDERS:
Equity market returns over the first half of 2003, particularly since the lows
of mid-March, have been strong. During January and February, the threat of war
with Iraq had a dampening effect on the market. However, with the fighting and
bombing that marked the inception of the war on March 19th, the uncertainty
that Wall Street finds so unsettling was eliminated. Thus began a rally that
was further fueled by the short length of the war, which appeased those who
were worried about the economic impact of a protracted engagement.
For the first half of 2003, the Fund returned 8.49% versus 11.76% for the S&P
500(1).
As of June 30, 2003, the portfolio remained more heavily invested in consumer
discretionary stocks -- particularly retailers and homebuilders -- than the S&P
500. Earnings growth in this group has been strong, which reflects the powerful
boost the consumer has provided to the economy during this multi-year bear
market. While our concentration in retailing stocks was beneficial during the
first quarter of 2003, many of these stocks suffered during the June quarter as
investors questioned whether the consumer would continue to spend in the face
of ongoing job cuts and a lackluster economy. The portfolio was also
overweighted in the health care sector, as many names in this group have shown
above-average growth rates. Here, we saw stock gains in the pharmaceutical,
biotechnology, pharmacy benefit manager and managed care companies. The
portfolio was less invested than its benchmark in those industries that are
less favored by our Timeliness Ranking System. As a case in point, we had
limited exposure to technology, both information technology and
telecommunications services, which was clearly a hindrance as we saw many
companies in these sectors produce large gains during the spring rally.
However, the improvement in earnings necessary to move stocks in this group
higher in the Timeliness Ranking System has not yet materialized; that is,
stock prices have increased in advance of earnings growth, precluding us from
participating more fully in the technology sector.
In terms of positioning the portfolio, we believe that a recovery in the
economy -- however slowly that may unfold -- will buoy sectors beyond those
dependent upon the consumer. Therefore, we will be making a concerted effort to
continue shifting assets from the overweighted consumer discretionary area to
the currently underweighted industrials and information technology sectors as
they move up in the Value Line Timeliness Ranking System. These groups should
benefit as corporations begin to spend again.
First-quarter results were generally better than expected, and since then,
there have been some signs that business activity is no longer declining. In
the second quarter, upside earnings surprises were more prevalent than downward
surprises. Revenue growth, however, remained somewhat elusive. Instead,
improvements in profitability appear to be a function of the widespread
business belt-tightening that we have seen over the past few years.
Nonetheless, the potential for corporate profits in the future looks promising.
That is, corporations have become so lean and cost-efficient that they should
realize significant gains in a more favorable economic environment.
We thank you for your continued confidence in Value Line.
Sincerely,
/s/ Jean Bernhard Buttner
Jean Bernhard Buttner
CHAIRMAN AND PRESIDENT
August 22, 2003
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(1) THE STANDARD & POOR'S 500 INDEX CONSISTS OF 500 STOCKS WHICH ARE TRADED ON
THE NEW YORK STOCK EXCHANGE, AMERICAN STOCK EXCHANGE AND THE NASDAQ
NATIONAL MARKET SYSTEM AND IS REPRESENTATIVE OF THE BROAD STOCK MARKET.
THIS IS AN UNMANAGED INDEX AND DOES NOT REFLECT CHARGES, EXPENSES OR
TAXES, AND IT IS NOT POSSIBLE TO DIRECTLY INVEST IN THIS INDEX.
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2
THE VALUE LINE FUND, INC.
FUND SHAREHOLDERS
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ECONOMIC OBSERVATIONS
The U.S. economic recovery, which had been proceeding at an uninspiring pace
for the better part of two years, showed a bit more spirit in the second
quarter of this year, as the nation's gross domestic product increased at a
modest 2.4% rate, pushed forward by a selective recovery in manufacturing, by
strong housing demand, and by improving retail sales. True, there were still
pockets of weakness around, most notably in the employment area, where non-farm
payrolls declined further and the unemployment rate climbed above 6%. Overall,
though, the economic picture at the end of the opening half was a lot brighter
than it had been at the start of the year, when talk of a possible double-dip
recession was still being heard.
Now, as we make our way through the second half of 2003, we are starting to see
evidence of a further improvement in business activity, with both the retail
and manufacturing sectors strengthening even more, albeit still selectively,
while housing remains resilient. The weak link in the recovery chain is still
the employment situation, which, at best, is starting to show signs of
stability following months of steady erosion. The ongoing support of the
Federal Reserve, which continues to maintain its low-interest-rate policies,
along with the earlier passage of a tax cut and fiscal stimulus package, should
provide the additional help needed by the economy to push GDP growth up into
the 3.5% to 4% range during the second half of the year.
Inflation, meantime, remains muted, thanks, in part, to subdued labor costs.
Adequate supplies of raw materials are also helping to keep the costs of
production low. We caution, though, that as the U.S. economy moves further
along the recovery trail over the next several years, some increase in pricing
pressures may emerge. Absent a stronger long-term business recovery than we now
envision, or a resumption of the earlier sharp rise in oil and gas prices
stemming from a surprisingly long conflict in the Middle East, inflation should
remain in check through the latter years of this decade. Long-term interest
rates, which have moved higher recently, as the economy has perked up, should
stabilize at modestly higher levels over the next several years.
PERFORMANCE DATA:**
AVERAGE ANNUAL GROWTH OF AN ASSUMED
TOTAL RETURN INVESTMENT OF $10,000
---------------- ----------------------
1 year ended 6/30/03 .......... -7.05% $ 9,295
5 years ended 6/30/03 ......... -4.01% $ 8,148
10 years ended 6/30/03 ......... 5.65% $17,322
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** THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NO GUARANTEE
OF FUTURE PERFORMANCE. THE AVERAGE ANNUAL TOTAL RETURNS AND GROWTH OF AN
ASSUMED INVESTMENT OF $10,000 INCLUDE DIVIDENDS REINVESTED AND CAPITAL
GAINS DISTRIBUTIONS ACCEPTED IN SHARES. THE INVESTMENT RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN ITS ORIGINAL COST. THE PERFORMANCE DATA DO
NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
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3
THE VALUE LINE FUND, INC.
PORTFOLIO HIGHLIGHTS AT JUNE 30, 2003 (UNAUDITED)
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
VALUE PERCENTAGE
ISSUE SHARES (IN THOUSANDS) OF NET ASSETS
-------------------------------------------------------------------------------
Amgen Inc. ........................... 115,000 $7,703 3.6%
Citigroup, Inc. ...................... 150,000 6,420 3.0
Fifth Third Bancorp .................. 109,500 6,279 2.9
Pfizer, Inc. ......................... 182,500 6,232 2.9
Harley-Davidson, Inc. ................ 150,000 5,979 2.8
Kohl's Corp. ......................... 107,000 5,498 2.6
General Electric Co. ................. 187,500 5,377 2.5
HCA, Inc. ............................ 166,500 5,335 2.5
Bed Bath & Beyond Inc. ............... 135,500 5,259 2.4
American International Group, Inc. ... 94,000 5,187 2.4
FIVE LARGEST INDUSTRY CATEGORIES
VALUE PERCENTAGE
INDUSTRY (IN THOUSANDS) OF NET ASSETS
------------------------------------------------------------------------------
Medical Supplies ......................... $ 19.011 8.8%
Financial Services - Diversified ......... 14,439 6.7
Computer Software & Services ............. 12,815 5.9
Retail Store ............................. 12,542 5.8
Medical Services ......................... 11,036 5.1
FIVE LARGEST NET SECURITY PURCHASES*
COST
ISSUE (IN THOUSANDS)
----------------------------------------------- ---------------
Microsoft Corp. ............................... $4,489
Omnicom Group, Inc. ........................... 3,278
Federal National Mortgage Association ......... 3,017
Noble Corporation ............................. 2,206
Staples, Inc. ................................. 2,156
FIVE LARGEST NET SECURITY SALES*
PROCEEDS
ISSUE (IN THOUSANDS)
-------------------------------- ---------------
Bed Bath & Beyond Inc. ......... $4,678
Amgen Inc. ..................... 3,127
Walgreen Co. ................... 3,019
Costco Wholesale Corp. ......... 2,304
eBay, Inc. ..................... 1,951
* FOR THE SIX MONTH PERIOD ENDED 6/30/03
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4
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2003
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
----------- -----------------
COMMON STOCKS (92.7%)
ADVERTISING (1.5%)
45,500 Omnicom Group, Inc ................... $3,262
AEROSPACE/DEFENSE (1.5%)
44,000 General Dynamics Corp. ............... 3,190
BANK (2.5%)
44,000 Wells Fargo & Co ..................... 2,218
62,500 Zions Bancorporation ................. 3,163
------
5,381
BANK -- MIDWEST (4.3%)
109,500 Fifth Third Bancorp .................. 6,279
120,000 U.S. Bancorp ......................... 2,940
------
9,219
BEVERAGE --
ALCOHOLIC (1.0%)
40,500 Anheuser-Busch Companies, Inc. ....... 2,068
BEVERAGE --
SOFT DRINK (2.5%)
67,500 Coca-Cola Co. ........................ 3,133
49,000 PepsiCo, Inc. ........................ 2,180
------
5,313
BIOTECHNOLOGY (3.6%)
115,000 Amgen Inc.* .......................... 7,703
BUILDING MATERIALS (0.8%)
40,500 Jacobs Engineering Group, Inc.* ...... 1,707
CHEMICAL --
SPECIALTY (1.5%)
59,000 Airgas, Inc. ......................... 988
69,500 International Flavors &
Fragrances, Inc. ..................... 2,219
------
3,207
VALUE
SHARES (IN THOUSANDS)
----------- -----------------
COMPUTER &
PERIPHERALS (2.0%)
68,500 Dell Computer Corp.* ................. $2,189
25,000 International Business Machines
Corp. ................................ 2,063
------
4,252
COMPUTER SOFTWARE &
SERVICES (5.9%)
34,000 Adobe Systems, Inc. .................. 1,090
25,500 First Data Corp. ..................... 1,057
112,500 Fiserv, Inc.* ........................ 4,006
174,500 Microsoft Corp. ...................... 4,469
50,000 Symantec Corp.* ...................... 2,193
------
12,815
DIVERSIFIED
COMPANIES (0.5%)
16,000 Danaher Corp. ........................ 1,089
DRUG (3.9%)
39,000 Forest Laboratories, Inc.* ........... 2,135
182,500 Pfizer, Inc. ......................... 6,232
------
8,367
EDUCATIONAL
SERVICES (1.0%)
41,300 Education Management Corp.* .......... 2,196
ELECTRICAL
EQUIPMENT (2.5%)
187,500 General Electric Co. ................. 5,377
ENTERTAINMENT
TECHNOLOGY (1.4%)
40,000 Electronic Arts Inc.* ................ 2,960
FINANCIAL SERVICES --
DIVERSIFIED (6.7%)
94,000 American International
Group, Inc. .......................... 5,187
150,000 Citigroup, Inc. ...................... 6,420
42,000 Federal National Mortgage
Association. ......................... 2,832
------
14,439
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5
THE VALUE LINE FUND, INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
----------- -----------------
GROCERY (0.5%)
22,000 Whole Foods Market, Inc.* ................. $1,046
HOME APPLIANCE (1.0%)
34,500 Whirlpool Corp. ........................... 2,198
HOMEBUILDING (2.9%)
42,500 KB Home ................................... 2,634
20,000 Lennar Corp. Class "A" .................... 1,430
2,000 Lennar Corp. Class "B" .................... 137
35,200 Pulte Homes, Inc. ......................... 2,171
------
6,372
HOUSEHOLD
PRODUCTS (2.5%)
35,500 Colgate-Palmolive Co. ..................... 2,057
37,500 Procter & Gamble Co. (The) ................ 3,344
------
5,401
INDUSTRIAL SERVICES (0.7%)
56,500 Kroll, Inc.*. ............................. 1,529
INSURANCE -- PROPERTY/
CASUALTY (0.8%)
22,000 Everest Re Group, Ltd. .................... 1,683
MEDICAL SERVICES (5.1%)
166,500 HCA, Inc. ................................. 5,335
70,600 Laboratory Corp. of America
Holdings* ................................. 2,129
85,000 Oxford Health Plans, Inc.* ................ 3,572
------
11,036
MEDICAL SUPPLIES (8.8%)
93,000 Biomet, Inc. .............................. 2,665
35,000 Cardinal Health, Inc. ..................... 2,251
70,500 Fisher Scientific International,
Inc.* ..................................... 2,460
100,000 Johnson & Johnson ......................... 5,170
100,000 Medtronic, Inc. ........................... 4,797
29,000 St. Jude Medical, Inc.* ................... 1,668
------
19,011
VALUE
SHARES (IN THOUSANDS)
----------- -----------------
NATURAL GAS --
DIVERSIFIED (0.5%)
19,500 Kinder Morgan, Inc. ....................... $1,066
OFFICE EQUIPMENT &
SUPPLIES (0.9%)
108,000 Staples, Inc.* ............................ 1,982
OILFIELD SERVICES/
EQUIPMENT (1.9%)
53,000 BJ Services Co.* .......................... 1,980
60,000 Noble Corporation* ........................ 2,058
------
4,038
PETROLEUM --
PRODUCING (1.0%)
34,000 Apache Corp. .............................. 2,212
PHARMACY
SERVICES (1.3%)
40,000 Express Scripts, Inc. Class "A"* .......... 2,728
RAILROAD (0.8%)
94,000 Norfolk Southern Corp. .................... 1,805
RECREATION (3.6%)
150,000 Harley-Davidson, Inc. ..................... 5,979
100,000 Mattel, Inc. .............................. 1,892
------
7,871
RESTAURANT (0.6%)
33,500 Cheesecake Factory,
Incorporated (The)* ....................... 1,202
RETAIL BUILDING
SUPPLY (3.4%)
67,000 Home Depot, Inc. (The) .................... 2,219
120,000 Lowe's Companies, Inc. .................... 5,154
------
7,373
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6
THE VALUE LINE FUND, INC.
JUNE 30, 2003
--------------------------------------------------------------------------------
VALUE
SHARES (IN THOUSANDS)
---------- ---------------
RETAIL -- SPECIAL
LINES (4.1%)
84,500 Abercrombie & Fitch Co.
Class "A"* ....................... $ 2,401
135,500 Bed Bath & Beyond Inc.* .......... 5,259
59,500 Gap, Inc. (The) .................. 1,116
--------
8,776
RETAIL STORE (5.8%)
60,500 Costco Wholesale Corp.* .......... 2,214
107,000 Kohl's Corp.* .................... 5,498
90,000 Wal-Mart Stores, Inc. ............ 4,830
--------
12,542
THRIFT (1.4%)
75,000 Washington Mutual, Inc. .......... 3,098
TOBACCO (1.0%)
49,300 Altria Group, Inc. ............... 2,240
TOILETRIES &
COSMESTICS (1.0%)
36,000 Avon Products, Inc. .............. 2,239
--------
TOTAL COMMON STOCKS
AND TOTAL INVESTMENT
SECURITIES (92.7%)
(COST $152,448,000) .............. 199,993
-------
VALUE
PRINCIPAL (IN THOUSANDS
AMOUNT EXCEPT PER SHARE
(IN THOUSANDS) AMOUNT)
-----------------------------------------------------------------------------
REPURCHASE AGREEMENTS (6.7%)
(INCLUDING ACCRUED INTEREST)
$10,700 Collateralized by $8,758,000
U.S. Treasury Bonds
6.25%, due 8/15/23,
with a value of
$10,934,000 (with UBS
Warburg LLC, 1.10%,
dated 6/30/03, due
7/1/03, delivery
value $10,700,327) ........... $ 10,700
3,800 Collateralized by $2,750,000
U.S. Treasury Bonds 14%,
due 11/15/11, with a value
of $3,884,000 (with
Morgan Stanley, 0.94%,
dated 6/30/03, due 7/1/03,
delivery value
$3,800,099) .................. 3,800
--------
TOTAL REPURCHASE
AGREEMENTS
(COST $14,500,000)............ 14,500
--------
CASH AND OTHER ASSETS
LESS LIABILITIES (0.6%) ......................................... 1,374
--------
NET ASSETS (100.0%) ............................................. $215,867
========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER OUTSTANDING SHARE
($215,867,073 \D 14,557,567
SHARES OF CAPITAL STOCK OUTSTANDING) ........................... $ 14.83
========
* NON-INCOME PRODUCING
SEE NOTES TO FINANCIAL STATEMENTS.
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7
THE VALUE LINE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS FOR THE
AT JUNE 30, 2003 (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNT) (IN THOUSANDS)
----------------- ---------------
ASSETS: INVESTMENT INCOME:
Investment securities, at value Dividends .................................. $ 778
(Cost - $152,448) ........................ $199,993 Interest ................................... 160
Repurchase agreements --------
(Cost - $14,500) ......................... 14,500 Total Income ............................. 938
Cash ........................................ 73 --------
Receivable for securities sold .............. 5,623 EXPENSES:
Dividends receivable ........................ 161 Advisory fee ............................... 686
Receivable for capital shares sold .......... 37 Service and distribution plan fees ......... 254
Prepaid insurance and registration fees ..... 20 Transfer agent fees ........................ 67
-------- Auditing and legal fees .................... 30
TOTAL ASSETS .............................. 220,407 Printing ................................... 21
-------- Custodian fees ............................. 20
LIABILITIES: Postage .................................... 17
Payable for securities purchased ............ 4,283 Registration and filing fees ............... 12
Payable for capital shares repurchased ...... 44 Directors' fees and expenses ............... 10
Accrued expenses: Telephone .................................. 10
Advisory fee .............................. 119 Insurance, dues and other .................. 9
Service and distribution plan fees --------
payable ................................ 44 Total Expenses Before Custody
Other ..................................... 50 Credits ............................ 1,136
-------- Less: Custody Credits ................. (1)
TOTAL LIABILITIES ......................... 4,540 --------
-------- Net Expenses .......................... 1,135
NET ASSETS .................................. $215,867 --------
======== NET INVESTMENT LOSS ........................ (197)
NET ASSETS CONSIST OF: --------
Capital stock, at $1.00 par value NET REALIZED AND UNREALIZED GAIN
(authorized 50,000,000, outstanding ON INVESTMENTS:
14,557,567 shares) ....................... $ 14,558 Net Realized Gain ..................... 11,150
Additional paid-in capital .................. 147,457 Change in Net Unrealized
Accumulated net investment loss ............. (197) Appreciation ....................... 5,706
Undistributed net realized gain --------
on investments ........................... 6,504 NET REALIZED GAIN AND CHANGE
Net unrealized appreciation of IN NET UNREALIZED APPRECIATION
investments .............................. 47,545 ON INVESTMENTS .......................... 16,856
-------- --------
NET ASSETS .................................. $215,867 NET INCREASE IN NET ASSETS FROM
======== OPERATIONS .............................. $ 16,659
NET ASSET VALUE, OFFERING AND ========
REDEMPTION PRICE PER OUTSTANDING
SHARE ($215,867,073 - 14,557,567
SHARES OUTSTANDING) ...................... $ 14.83
=======
SEE NOTES TO FINANCIAL STATEMENTS.
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8
THE VALUE LINE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS FOR THE
SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31, 2002
------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
--------------- -------------
(IN THOUSANDS)
OPERATIONS:
Net investment loss ............................................ $ (197) $ (790)
Net realized gain (loss) on investments ........................ 11,150 (4,404)
Change in net unrealized appreciation .......................... 5,706 (68,950)
--------- ----------
Net increase (decrease) in net assets from operations .......... 16,659 (74,144)
--------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain from investment transactions ................. -- (2,007)
--------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares ................................... 30,233 87,992
Proceeds from reinvestment of distributions to shareholders .... -- 1,895
Cost of shares repurchased ..................................... (37,363) (110,432)
--------- ----------
Decrease from capital share transactions ....................... (7,130) (20,545)
--------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 9,529 (96,696)
NET ASSETS:
Beginning of period ............................................ 206,338 303,034
--------- ----------
End of period .................................................. $ 215,867 $ 206,338
========= ==========
ACCUMULATED NET INVESTMENT LOSS, END OF PERIOD .................. $ (197) $ --
========= ==========
SEE NOTES TO FINANCIAL STATEMENTS.
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9
THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company whose primary investment
objective is long-term growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
(A) SECURITY VALUATION. Securities listed on a securities exchange and
over-the-counter securities traded on the NASDAQ national market are valued at
the closing sales prices on the date as of which the net asset value is being
determined. In the absence of closing sales prices for such securities and for
securities traded in the over-the-counter market, the security is valued at the
midpoint between the latest available and representative asked and bid prices.
Securities for which market quotations are not readily available or that are
not readily marketable and all other assets of the Fund are valued at fair
value as the Board of Directors may determine in good faith. Short-term
instruments with maturities of 60 days or less at the date of purchase are
valued at amortized cost, which approximates market value. Short-term
instruments with maturities greater than 60 days at the date of purchase are
valued at the midpoint between the latest available and representative asked
and bid prices, and commencing 60 days prior to maturity such securities are
valued at amortized cost.
(B) REPURCHASE AGREEMENTS. In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. In
the event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
(C) FEDERAL INCOME TAXES. It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies, including the distribution requirements of the Tax Reform Act of
1986, and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax or excise tax provision is required.
(D) SECURITY TRANSACTIONS AND DISTRIBUTIONS. Security transactions are
accounted for on the date the securities are purchased or sold. Interest income
is accrued as earned. Realized gains and losses on sales of securities are
calculated for financial accounting and federal income tax purposes on the
identified cost basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
--------------------------------------------------------------------------------
10
THE VALUE LINE FUND, INC.
JUNE 30, 2003
--------------------------------------------------------------------------------
2. CAPITAL SHARE TRANSACTIONS, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS
Transactions in capital stock were as follows (IN THOUSANDS EXCEPT PER SHARE
AMOUNTS):
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
--------------- -------------
Shares sold ........................ 2,235 4,997
Shares issued to
shareholders in
reinvestment of
dividends and
distributions ................... -- 138
----- -----
2,235 5,135
Shares repurchased ................. 2,768 6,434
----- -----
Net decrease ....................... (533) (1,299)
===== ======
Distributions per share
from net realized gains ......... $ -- $.1335
====== ======
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, excluding short-term securities,
were as follows:
SIX MONTHS
ENDED
JUNE 30, 2003
(UNAUDITED)
---------------
(IN THOUSANDS)
PURCHASES:
Investment Securities ......... $65,424
=======
SALES:
Investment Securities ......... $48,473
=======
4. INCOME TAXES:
At June 30, 2003, information on the tax components of capital is as follows:
(IN THOUSANDS)
---------------
Cost of investments for tax purposes ......... $167,190
========
Gross tax unrealized appreciation ............ $ 49,518
Gross tax unrealized depreciation ............ (2,215)
--------
Net tax unrealized appreciation
on investments ............................ $ 47,303
========
Capital loss carryforward
Expires December 31, 2010 ................. $ 3,006
========
During the year ended December 31, 2002, as permitted under federal income tax
regulations, the Fund elected to defer $1,398,000 of post-October net capital
losses to the current taxable year. To the extent future capital gains are
offset by capital losses, the Fund does not anticipate distributing any such
gains to the shareholders.
Net realized gains/losses differ for financial statement and tax purposes
primarily due to differing treatments of wash sales
5. INVESTMENT ADVISORY CONTRACT, MANAGEMENT FEES
AND TRANSACTIONS WITH AFFILIATES
An advisory fee of $686,000 was paid or payable to Value Line, Inc., the Fund's
investment adviser (the "Adviser"), for the six months ended June 30, 2003.
This was computed at the rate of .70% of the first $100 million of the Fund's
average daily net assets plus .65% on the excess thereof, and paid monthly. The
Adviser provides research, investment programs, supervision of the investment
portfolio and pays costs of administrative services, office space, equipment
and compensation of administrative, bookkeeping and clerical personnel
necessary for managing the affairs of the Fund. The Adviser also provides
persons, satisfactory to the Fund's Board of Directors, to act as officers and
employees of the Fund and pays their salaries and wages. The Fund bears all
other costs and expenses.
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THE VALUE LINE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2003
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The Fund has a Service and Distribution Plan (the "Plan"), adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, for the payment of certain
expenses incurred by Value Line Securities, Inc. (the "Distributor"), a
wholly-owned subsidiary of the Adviser, in advertising, marketing and
distributing the Fund's shares and for servicing the Fund's shareholders at an
annual rate of 0.25% of the Fund's average daily net assets. For the six months
ended June 30, 2003, fees amounting to $254,000 were paid or payable to the
Distributor under this Plan.
Certain officers and directors of the Adviser and its wholly owned subsidiary,
Value Line Securities, Inc. (the Fund's distributor and a registered
broker/dealer), are also officers and directors of the Fund. During the six
month period ended June 30, 2003, the Fund paid brokerage commissions totaling
$74,820 to the Distributor, which clears its transactions through unaffiliated
brokers.
For the six months ended June 30, 2003, the Fund's expenses were reduced by
$495 under a custody credit arrangement with the Custodian.
The Value Line, Inc. Profit Sharing and Savings Plan owned 359,363 shares of
the Fund's capital stock, representing 2.5% of the outstanding shares on June
30, 2003.
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THE VALUE LINE FUND, INC.
FINANCIAL HIGHLIGHTS
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SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 2003 -----------------------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
=================================================================================================
NET ASSET VALUE, BEGINNING
OF PERIOD .................... $ 13.67 $ 18.49 $ 21.37 $ 26.25 $ 22.65 $ 19.29
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment (loss)
income .................... (.01) (.05) (.04) (.07) (.02) .03
Net gains or losses on
securities (both realized
and unrealized) ........... 1.17 (4.64) (2.70) (3.95) 5.98 3.85
--------- --------- --------- --------- --------- ---------
Total from investment
operations ................ 1.16 (4.69) (2.74) (4.02) 5.96 3.88
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net
investment income ......... -- -- -- -- -- (.03)
Distributions from net
realized gains ............ -- (.13) (.14) (.86) (2.36) (.49)
--------- --------- --------- --------- --------- ---------
Total distributions ......... -- (.13) (.14) (.86) (2.36) (.52)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 14.83 $ 13.67 $ 18.49 $ 21.37 $ 26.25 $ 22.65
========= ========= ========= ========= ========= =========
TOTAL RETURN .................. 8.49%+ -25.35% -12.82% -15.35% 26.74% 20.25%
========= ========= ========= ========= ========= =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ............... $ 215,867 $ 206,338 $ 303,034 $ 386,406 $ 495,465 $ 418,439
Ratio of expenses to average
net assets ................... 1.12%*(1) 1.11%(1) 1.04%(1) .89%(1) .76%(1) .77%
Ratio of net investment (loss)
income to average net assets . (0.19)%* (0.31)% (.18)% (.27)% (.09)% .16%
Portfolio turnover rate ....... 27%+ 33% 45% 17% 36% 98%
(1) RATIOS REFLECT EXPENSES GROSSED UP FOR CUSTODY CREDIT ARRANGEMENT. THE
RATIO OF EXPENSES TO AVERAGE NET ASSETS NET OF CUSTODY CREDITS WOULD HAVE
BEEN 1.03% FOR THE YEAR ENDED DECEMBER 31, 2001 AND UNCHANGED FOR THE
YEARS ENDED DECEMBER 31, 2002, 2000, 1999, AND UNCHANGED FOR THE SIX
MONTHS ENDED JUNE 30, 2003.
+ NOT ANNUALIZED.
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
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THE VALUE LINE FUND, INC.
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THE VALUE LINE FUND, INC.
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THE VALUE LINE FUND, INC.
THE VALUE LINE FAMILY OF FUNDS
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1950 -- THE VALUE LINE FUND seeks long-term growth of capital. Current income
is a secondary objective.
1952 -- VALUE LINE INCOME AND GROWTH FUND'S primary investment objective is
income, as high and dependable as is consistent with reasonable risk. Capital
growth to increase total return is a secondary objective.
1956 -- THE VALUE LINE SPECIAL SITUATIONS FUND seeks long-term growth of
capital. No consideration is given to current income in the choice of
investments.
1972 -- VALUE LINE LEVERAGED GROWTH INVESTORS' sole investment objective is to
realize capital growth.
1979 -- THE VALUE LINE CASH FUND, a money market fund, seeks to secure as high
a level of current income as is consistent with maintaining liquidity and
preserving capital. An investment in the Fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
1981 -- VALUE LINE U.S. GOVERNMENT SECURITIES FUND
seeks maximum income without undue risk to capital. Under normal conditions, at
least 80% of the value of its net assets will be invested in securities issued
or guaranteed by the U.S. Government and its agencies and instrumentalities.
1983 -- VALUE LINE CENTURION FUND* seeks long-term growth of capital.
1984 -- THE VALUE LINE TAX EXEMPT FUND seeks to provide investors with the
maximum income exempt from federal income taxes while avoiding undue risk to
principal. The Fund offers investors a choice of two portfolios: The Money
Market Portfolio and The National Bond Portfolio. The fund may be subject to
state and local taxes and the Alternative Minimum Tax (if applicable).
1985 -- VALUE LINE CONVERTIBLE FUND seeks high current income together with
capital appreciation primarily from convertible securities ranked 1 or 2 for
year-ahead performance by the Value Line Convertible Ranking System.
1986 -- VALUE LINE AGGRESSIVE INCOME TRUST seeks to maximize current income.
1987 -- VALUE LINE NEW YORK TAX EXEMPT TRUST seeks to provide New York
taxpayers with the maximum income exempt from New York State, New York City and
federal income taxes while avoiding undue risk to principal. The Trust may be
subject to state and local taxes and the Alternative Minimum Tax (if
applicable).
1987 -- VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST* seeks to achieve a high
total investment return consistent with reasonable risk.
1993 -- VALUE LINE EMERGING OPPORTUNITIES FUND invests primarily in common
stocks or securities convertible into common stock, with its primary objective
being long-term growth of capital.
1993 -- VALUE LINE ASSET ALLOCATION FUND seeks high total investment return,
consistent with reasonable risk. The Fund invests in stocks, bonds and money
market instruments utilizing quantitative modeling to determine the asset mix.
* ONLY AVAILABLE THROUGH THE PURCHASE OF GUARDIAN INVESTOR, A TAX DEFERRED
VARIABLE ANNUITY, OR VALUEPLUS, A VARIABLE LIFE INSURANCE POLICY.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THE VALUE LINE FUNDS, INCLUDING
CHARGES AND EXPENSES, SEND FOR A PROSPECTUS FROM VALUE LINE SECURITIES, INC.,
220 EAST 42ND STREET, NEW YORK, NEW YORK 10017-5891 OR CALL 1-800-223-0818, 24
HOURS A DAY, 7 DAYS A WEEK, OR VISIT US AT WWW.VALUELINE.COM. READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
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